Defense Expenditures, Security Threats, and Governmental Deficits

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Abstract
This article presents a model of defense spending in India that is based on (a) acceleration, (b) threat/security perceptions, and (c) the role of governmental deficits. The specific mechanisms involved are based upon the feedbacks that exist between the growth in military spending and the perceived security that military expenditures purportedly purchase. Additionally, military spending is argued to fuel inflation in certain economies and put additional pressure on the size of the governmental deficit, that in turn places a brake on the growth of defense spending. These arguments are formulated mathematically and a continuous time simulation model of these processes is developed. Using dynamic trajectory fitting techniques, we subjected the nonlinear dynamic model to an empirical test with data pertinent to the Indian case. The empirical results are generally supportive of the model developed: Fit is high and most, but not all, parameters are in the predicted direction and highly significant. The primary shortcoming seems to lie in the putative, but non-supported, link between security perceptions and military spending.

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